Turkish Deficit Narrows to $4.2 Billion, Better Than Expected

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Researched by Industrial Info Resources (Sugar Land, Texas)-February's current account data show that the rebalancing of the Turkish economy is progressing more smoothly than many analyst though. The Turkish economy has a $4.2 billion current account deficit, much narrower than estimate of $4.7 billion, according to Central Bank data. The 12-month rolling current account deficit narrowed to $75.2 billion in February from $77.1 billion in January.

Meanwhile, Turkish Deputy Prime Minister Ali Babacan said the worst of Turkey'scurrent account deficit is over and that the shortfall was declining as expected. "The downward trend in the current account deficit will continue, but it will remain high for a few years," Babacan said in a televised press conference in Ankara on Wednesday. Separately, Turkish Economy Minister Zafer Caglayan said that the deficit would continue to improve in March, according to his estimates.

Weaker import and export growth has picked up since the beginning of this year, helped by the weaker Turkish lira. "At its current rate of decline, the current account deficit could drop to around 6% of GDP next year, down from last year's 10%," William Jackson, Capital Economics' emerging markets economist, said in a research note to clients. "This is only slightly above what is generally viewed as a sustainable current account deficit of 5% of GDP," Jackson said.

Standing at $2.1 billion in the first two months of the year, the non-energy current account gap is considerably narrower than that of the deficit, with $284 million, compared to last year's $5.5 billion deficit. (See Industrialinfo's March 21 story - Turkey's Oil & Gas Imports Could Rise to $68 Billion in 2012.

At $1.4 billion, the foreign direct investment inflows are stronger than in the same period of 2011 with $500 million, although the FDI coverage of the current account deficit remains low at around 14%.

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